156. Through the assessment of inherent credit risk, competent authorities should determine the main drivers of the institution's credit risk exposure and evaluate the significance of the prudential impact of this risk for the institution. The assessment of inherent credit risk should therefore be structured around the following main steps:
a. preliminary assessment;
b. assessment of the nature and composition of the credit portfolio;
c. assessment of portfolio credit quality;
d. assessment of the level and quality of credit risk mitigation; and
e. assessment of the level of provisions and of credit valuation adjustments.
157. Competent authorities should assess credit risk in both current and prospective terms. Competent authorities should combine the analysis of the current portfolio credit risk with the assessment of the institution's credit risk strategy (potentially as part of the wider assessment of strategy carried out as part of the BMA) and consider how the expected, as well a
…